US Becomes India's Second Biggest Oil Supplier, Saudi

March 15, 2021

U.S. becomes India's second biggest oil supplier, China's Jan-Feb refinery output up 15% on solid Saudi plunges to No. 4 demand for fuels The United States overtook Saudi Arabia as India's China's daily refinery throughput rose 15% in the first two second biggest oil supplier after Iraq last month, as months of the year, from a low base a year earlier, as fuel refiners boosted cheaper U.S. crude purchases to record demand remains solid and refineries rush to hike levels to offset OPEC+ supply cuts, data from trade production ahead of maintenance season. sources showed. Refinery processing reached 114.24 million tonnes in the The switch in supplies, triggered by lower U.S. crude January-February period, data from the National Bureau demand, coincided with Saudi Arabia's voluntary extra 1 of Statistics showed on Monday, equivalent to about million barrel per day (bpd) output cut, on top of an 14.13 million barrels per day (bpd). The agency didn't agreement by the Organization of the Petroleum disclose numbers for January and February separately. Exporting Countries and its allies (OPEC+) to maintain The daily rate is about the same level as in December lower production. 2020, up from 12.07 mln bpd in Jan-Feb 2020 and also India's imports from the United States - the world's top above the 12.68 million bpd recorded in the first two producer - rose 48% to a record 545,300 bpd in February months of 2019. from the prior month, accounting for 14% of India's overall Chinese refineries slashed output in the first quarter last imports last month, the data obtained by Reuters showed. year as the rapid spread of the coronavirus decimated In contrast, February imports from Saudi Arabia fell by fuel demand. 42% from January to a decade low of 445,200 bpd, the Chinese refined fuel consumption has staged a strong data showed. Saudi Arabia, which has consistently been rebound from coronavirus-induced weakness as the one of India's top two suppliers, slipped to No. 4 for the economy recovered and government stimulus kicked in. first time since at least January 2006. Refinery output growth is expected to slow in the second India's oil import data by country from before 2006 is not quarter of 2021 as independent plants go off-line for available to Reuters. regular maintenance amid weakening profit margins as "U.S. demand was weak and refineries were running at crude oil prices strengthen. low rates so the U.S. crude had to go somewhere, and But the scheduled startup of a 200,000 bpd crude oil unit Asia is the region which has seen rapid demand at private refiner Zhejiang Petrochemical Corp in eastern recovery," said Refinitiv analyst Ehsan Ul Haq. China will compensate for some of the curbs by smaller "China has not been taking U.S. oil because of (the) trade independents. problem, so India is the obvious choice," he said. "Runs should slip to below the 13.5 million bpd level Iraq continued to be the top oil seller to India despite a through to May. Domestic inventories should see some 23% drop in purchases to a five-month low of 867,500 significant drawdowns in the next two-three months bpd, the data showed. (during a period of) maintenance and robust demand," The UAE slipped to fifth position from third in January, said Mia Geng, a Singapore-based analyst at energy while Nigeria rose to third from fifth, exporting 472,300 consultancy FGE. bpd, the most since Oct 2019. The latest data also showed China's crude oil production India shipped in 3.92 million bpd of oil in February, a in the first two months rose 0.4% from a year earlier to decline of 18% from January, the data showed. 32.08 million tonnes, or 3.97 million bpd. That compared Haq said India may have taken smaller volumes in with an average of 3.89 million bpd for 2020. February because, similarly to others in the market, it Meantime, China's natural gas output expanded 13.5% in assumed that OPEC+ might ease production cuts, January-February from a year earlier to 34.8 billion cubic potentially leading to lower prices. metres, extending a jump that saw near 10% growth for India has repeatedly called on OPEC+ to ease supply full-year 2020. curbs and has blamed Saudi's voluntary cuts for contributing to a spike in global oil prices. U.S. oil & gas rig count falls for first time since The country is the world's third biggest oil importer and November -Baker Hughes consumer, shipping in about 84% of its crude needs, and U.S. energy firms cut the number of oil and natural gas relies heavily on the Middle East. rigs operating for the first time since November even as Its government has asked refiners to speed up crude prices soared to their highest since 2018. diversification of crude sources after Saudi Arabia's oil The U.S. oil and gas rig count, an early indicator of future minister, in response to India's calls for producers to ease output, fell by one to 402 in the week to March 12, output cuts, told the country to dip into reserves filled with according to data on Friday from energy services firm cheaper oil bought last year. Baker Hughes Co. The Middle East's share of India's overall imports plunged That count is 390 rigs, or 49%, below this time last year. to a 22-month low of about 52.7%, while Africa's rose to The oil and gas rig count, however, has increased for the 15%, the highest since September. past seven months since dropping to a record low of 244 "(The) widening differential between WTI and Brent in August, according to Baker Hughes data going back to during December and January, and relatively subdued 1940. freight rates, offered India an opportunity to buy U.S. oil to U.S. oil rigs fell one to 309 this week, while gas rigs were make up for lower Middle Eastern suppliers," Haq said. unchanged at 92. Low supplies from the Middle East dragged OPEC U.S. crude futures soared to almost $68 a barrel this nations' share of India's oil imports to a record low in the week, their highest since 2018. Prices rebounded from April to February period. last year's crash, spurred by the coronavirus pandemic's

1 March 15, 2021 (continued) demand destruction. Oil producer Ovintiv nears south Texas asset sale for This week, the government revised down 2021's decline over $800 mln - sources expected in crude production. Output is seen falling Oil producer Ovintiv Inc is in advanced talks with a 160,000 barrels per day (bpd) in 2021 to 11.15 million privately owned energy investment firm to sell its holding bpd, a smaller decrease than its previous monthly in a south Texas shale basin for more than $800 million, forecast for a 290,000-bpd drop. sources familiar with the matter said on Friday. Before the pandemic, companies were cutting rigs about The sale of its Eagle Ford acreage would mark a four rigs on a weekly basis over the prior year to focus on milestone for Denver-based Ovintiv, which is on a multi- boosting cash flow, reducing debt and increasing year debt reduction plan it outlined in February. The plan shareholder returns. includes generating about $1 billion from divesting But a year ago, rig declines accelerated to an average of assets. 45 per week from late March through early June, until Ovintiv's shares have gained over 90% so far this year, higher prices in August spurred drillers to return to the amid a broad rally in oil producers aided by rising U.S. wellpad. crude prices. Enverus, which has its own rig count that showed drop of The prospective buyer is Pontem Energy Capital, which is two as of March 10, noted "This week marks one year run by Felix Energy founder Skye Callantine, Jeff Bartlett since the World Health Organization declared COVID-19 and Cameron Brown, the sources said. a pandemic and one year since companies started While there is no guarantee that the deal will go through, looking to shed rigs." it could be announced as early as next week, according In the last year, however, Enverus said two gas-focused to one of the sources. regions "have actually seen an increase in drilling" with The sources spoke on the condition of anonymity as the the Haynesville Shale in Arkansas, Louisiana and Texas information is not public yet. Ovintiv declined to comment, up three to 52 rigs and the Marcellus Shale in while Pontem did not immediately respond to a request Pennsylvania, Ohio and West Virginia up two to 44 rigs. for comment. Enverus said companies that have added the most rigs The Eagle Ford position, which was bought in 2014 for year-over-year include Marcellus and Haynesville about $3.1 billion from Freeport-McMoRan Inc, attracted producers like CNX Resources Corp (from zero to two), multiple private equity bidders, the sources said. National Fuel Gas Co (from one to three) in the Marcellus Pontem's bid was well above rivals, according to two of and Comstock Resources Inc (from five to seven). the sources. The biggest year-over-year declines came from Exxon The Eagle Ford asset sale, which Reuters first reported Mobil Corp (down 57 rigs to just eight now), was underway in November, would be the latest step ConocoPhillips (down 21 to 14) and Chevron Corp (down Ovintiv has taken to cut down debt and gain investor 19 to nine). confidence. While many U.S. shale producers have generated below Sustained higher oil prices to spur U.S. output growth par returns in recent years, Ovintiv also drew shareholder -JP Morgan ire for its acquisition of Newfield Exploration, which left it Sustained higher oil prices are expected to spur higher with nearly $7 billion in debt, and high executive pay. U.S. oil output this year, JP Morgan analysts said in a Ovintiv was targeted by activist investor Kimmeridge weekly note. Energy Management last year, which led to a proxy fight "At current prices, most U.S. onshore operators are and the company agreeing earlier this month to add one economic, leaving a vast group of operators, from large of the investor's nominees to its board. public companies to private players, in good position to In February, Ovintiv introduced changes including ramp up activity in 2H21 and build solid momentum for aligning management pay with climate change targets higher volumes in 2022," they said. and came up with a revised plan to cut its debt by around The bank now forecasts U.S. crude oil production to 35% to $4.5 billion, while also selling its Duvernay assets average 11.78 million barrels per day (bpd) in December in Alberta. 2021, up 710,000 bpd year-on-year. The bank projects U.S. tight oil production to average Energy firms seize on carbon tech, environmental 11.36 million bpd in 2021, compared to 11.32 million bpd goals to build new businesses last year. Major energy companies are turning their carbon Earlier this week, the Energy Information Administration sequestration technologies and projects into business said U.S. crude oil production is expected to fall by ventures, converting some efforts that help pump more oil 160,000 bpd in 2021 to 11.15 million bpd, a smaller and gas into profit-making ventures while burnishing their decline than its previous monthly forecast for a 290,000- environmental reputations. bpd drop. The efforts could help big greenhouse gas emitters Oil prices have staged a spectacular recovery since reduce their carbon emissions intensity and move closer hitting record lows last year at the height of the COVID-19 to Paris Agreement climate change targets. Energy giants pandemic. view these efforts as balancing customer demands for U.S. WTI crude futures which traded at about -$40 a more oil and gas while fitting in a lower-carbon energy barrel in April 2020, bounced back by nearly 270% from world. those lows, trading at nearly $68 a barrel on March 8. Carbon removal technologies will be necessary to limit

2 March 15, 2021 (continued) the increase in planetary warming to no more than 1.5 The two firms are planning pilot projects that degrees Celsius, the goal of the 2015 Paris Climate commercialize the Blue Planet carbon capture process. Agreement, the United Nations has said. Speculators raise U.S. crude oil net longs-CFTC KINDER MORGAN INC Money managers raised their net long U.S. crude futures Pipeline operator Kinder Morgan has formed a business and options positions in the week to March 9, the U.S. unit to acquire assets and build new services around Commodity Futures Trading Commission (CFTC) said on carbon storage, renewable gas and diesel, hydrogen and Friday. The speculator group raise its combined futures power generation and transmission. and options position in New York and London by 8,656 Its Energy Transition Ventures unit aims to broaden low- contracts to 407,876 during the period. The data exclude carbon projects already in development, the company trader positions in the NYMEX financial crude oil futures said. The operation will have its own financial, contract, which is normally included in our aggregate commercial and engineering staff to develop and calculations. The data were not provided by the CFTC. commercialize new projects. Mexican president says 'very large' oil field found in BAKER HUGHES CO Tabasco state The oilfield equipment and services firm acquired Mexican President Andres Manuel Lopez Obrador said Norwegian technology firm Compact Carbon Capture on Friday a "very large" oil discovery had been made in (3C) and plans to commercialize its solvent-based Tabasco, his home state in southern Mexico, as the products. 3C says its scalable designs can be as little as government tries to revive crude output at state oil a quarter of the footprint of other carbon-capturing company Petroleos Mexicanos (Pemex). systems. Lopez Obrador revealed the discovery during a regular Baker Hughes will market the rotating 3C equipment morning news conference, but gave no further details. alongside its products and services to industries including "We discovered a very large oil field in Tabasco," he said. oil and gas, liquefied natural gas, shipping and pipeline Still, a source at Pemex told Reuters that the find was operators. 3C's industrial-scale unit designs could capture both "new and important". up to 250,000 tonnes of carbon dioxide (CO2) per year. Lopez Obrador said more details would come on March 18 in Tabasco, where he is due to mark the anniversary EXXON MOBIL CORP of the 1938 nationalization of the oil industry. The event Exxon Mobil formed Low Carbon Solutions LLC, offering would be held at the Dzimpona-1EXP onshore well in to make available its technologies and projects that Tabasco, the source said. Exxon deployed to sequester its planet-warming CO2 In 2019, Pemex announced the discovery of a separate emissions. The business also aims to leverage Exxon's large oil field also in Tabasco. experience in producing hydrogen gas. The Low Carbon business will leverage Exxon's CO2 Argentine energy giant YPF sticks with $2.7 bln storage caverns along the U.S. Gulf Coast and under the capex plan despite debt woes North Sea. It also will market emissions-reduction credits Argentine state oil giant YPF said on Friday it would from the use of its sequestration projects. maintain its $2.7 billion 2021 investment plan despite only partially resolving a recent debt crisis, with $1.3 billion of OCCIDENTAL PETROLEUM CORP the spending for shale oil and gas production at Vaca Occidental formed Oxy Low Carbon Ventures to marshal Muerta. its carbon capture, utilization and emissions reduction The investment represents an 73% increase versus 2020, operations. It and private equity investor Rusheen Capital when the firm suffered a severe blow from the drop in Management formed 1PointFive, a Texas business that international oil prices and lower demand due to the aims to capture CO2 directly from the air and bury it coronavirus pandemic. underground. YPF, which leads activity in Vaca Muerta, one of the United Airlines pledged a multimillion dollar investment in largest shale formations in the world, restructured a 1PointFive and will become a customer of the business, portion of its debt last month, but fell well short of a larger aiming to absorb the equivalent annual carbon emissions plan to free up its financing amid a squeeze from the of 10% of its aircraft. central bank on access to foreign currency. "In order to make this ambitious activity recovery plan TOTAL SE viable, YPF will maintain strict discipline in managing Total has pledged to put 10% of its research and costs, seeking to improve operational efficiencies," YPF development budget to advance carbon capture, said in a statement. utilization and storage technology. It invested in a project Vaca Muerta, the size of Belgium, is the world's fourth to study the costs of capturing CO2 generated by a largest unconventional oil reserve and the second largest LafargeHolcim cement plant in Colorado and bury the for gas. YPF said it would drill 180 new wells in the area. emissions underground. The oil company reported at the beginning of the month that it had a net profit of $539 million in the fourth quarter CHEVRON CORP of 2020, reversing the trend of big losses that it had the Chevron invested in Blue Planet Systems, a startup rest of last year as a result of the pandemic. commercializing a technology that makes a substitute for The plan includes investing $800 million in conventional limestone in concrete and building materials from CO2. hydrocarbons and $600 million in gas this year.

3 March 15, 2021

Finland's Neste to build biofuels refinery in fat from food industry waste, fish fat from fish processing Rotterdam waste and residues from vegetable oil processing. Finnish biofuel producer and oil refiner Neste on Monday After a thorough study, Rotterdam was chosen as said it has chosen the Dutch port of Rotterdam as the location for a European refinery over Finland's Porvoo location for its next renewable products refinery. due to lower costs, the company said. Neste said the new plant will be around the same size as The decision will come as a disappointment to the Finnish the 1.5 billion euro ($1.79 billion) refinery expansion it is government which owns 44.2% of the company and had currently building in Singapore, which the company hoped the new refinery would bring jobs and tax income described as its biggest investment so far. to Finland. The Singapore unit produces renewable fuels, mainly Neste said it expects to make a final investment decision from waste and residues such as used cooking oil, animal in late 2021 or early 2022.

(Inside Oil - Americas Edition is compiled by Shruthi Narayanan in Bengaluru) Refinitiv 3 Times Square, New York, NY 10036 For questions or comments about this report, contact: [email protected] Please visit: Refinitiv for more information. To subscribe to Americas Oil newsletter, click here. Privacy statement